Banks seek government's cover to reach deal with Mallya

NEW DELHI: Signalling a change in stance, bankers are now talking of settling the loan default with Vijay Mallya-promoted Kingfisher Airlines, provided the government is willing to give cover.

Although bankers acknowledged in private that it would be more prudent to clinch a deal if one of the most high-profile loan defaulters was willing to sweeten the offer, they insisted that any settlement below Rs 9,000 crore needed the government's blessings or could come through a forum so that bank executives are not hauled up by courts or the Comptroller & Auditor General, Central Vigilance Commission or CBI.

Seventeen public sector banks led by State Bank of India had an exposure of around Rs 7,000 crore to the airline but including interest and penalty the dues have now increased. Mallya had offered to deposit Rs 6,868 crore to the Supreme Court, but the proposal was rejected by lenders. "Given the high-profile nature of the case, it is difficult if we opt for a settlement below the Rs 9,000 crore that we have been demanding. But if the government provides protection, we can look at a deal," said a senior executive at one of the large banks that has a significant exposure.

Another executive said without cover against action from CAG or CBI, no banker would settle the loan although it made sense.